As part of the aid package, Laiki and BoC were forced to sell their Greek branches, while deposits the banks had in that country were exempt from the bail-in, to avoid contagion to Greece.
“As understandable as ring-fencing may be, this was absent at the time of deciding the Greek PSI (Private Sector Involvement) in relation to Greek government bonds which cost Cyprus 25 per cent of its GDP,” Anastasiades wrote.
He was referring to a Greek sovereign debt restructuring which imposed heavy losses on Cypriot banks in early 2012.
“The heavy burden placed on Cyprus by the restructuring of Greek debt was not taken into consideration when it was Cyprus’ turn to seek help,” Anastasiades said.
BoC, is assuming some of Laiki’s assets, was also forced to assume Laiki’s emergency liquidity assistance (ELA) liability, a funding lifeline provided from the European Central Bank.
BoC has a total ELA liability of around €2 billion. By taking an additional €9 billion from Laiki, which was accumulated over the course of the last year under very questionable circumstances, BoC has substantially increased the vulnerability of its own funding structure, with its cumulative ELA liability reaching a very high €11 billion, Anastasiades said.
“The imposition of Laiki’s ELA liability on BoC is the main contributor to the liquidity strain Bank of Cyprus faces.”
“I stress the systemic importance of BoC, not only in terms of the banking system but also for the entire economy. The success of the programme approved by the Eurogroup and the troika depends upon the emergence of a strong and viable BoC,”the president said.
He urged lenders to find a long-term solution to BoC’s liquidity issue in a bid to regain confidence and allow the economy to function without restrictions.
“Artificial measures such as capital restrictions may seem to prevent a bank run in the short term but will only aggravate the depositors the longer they persist. Rather than creating confidence in the banking system they are eroding it by the day. Maintaining capital restrictions for a long period will inevitably have devastating effects on the local economy, will also affect the country’s international business and will have an adverse impact on GDP.”
Anastasiades propune conversia ELA de la defuncta Laiki in obligatiuni, o solutie cat de cat rezonabila la o problema complet ilegala (de ce cand s-a lichidat Laiki au fost rasi toti actionarii, bondholderii si deponentii de peste 100.000€ dar a fost scutita de bail-in insusi ECB, care in calitate de banca centrala nici nu ar fi suferit deloc pierderea banilor, spre deosebire de toti ceilalti „pagubiti”?)